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Enhanced (Direct) AccessFOR THE GCF BUSINESS MODEL FRAMEWORK

Presented at the AfDBConsultation on African Perspectives on the Green Climate Fund (GCF)

26-27 September 2013Sheraton Hotels, Tunis, Tunisia

Benito Müller

Director Energy and Climate Change, OIES;benito.mueller@philosophy.ox.ac.uk

1. Introduction

Design methodology (Paragraph 1-3 GI)

a) Being equitable and being efficient/effective both apply to every aspect of theframework, and whenever one is taken into consideration, the other should also be.

b) Transparent, Accountable, with effective stakeholder engagement/involvement, inturn, is a group of framing conditions that are targeted at decision-making processof the GCF.

c) Scalable and flexible: general supply and demand side scope

d) Country driven and with simplified/improved access are focused on the ‘demand-side’

On transparency, accountability, and effective stakeholderengagement/involvement

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Sources:

2. What scale? What flexibility?

Can we expect there to be a design which is unrestrictedly scalable, ormust we expect there to be design-specific upper and lower limits ofoperational scale?

The key design question then becomes what scale of operations (in

terms of annual funding) would be necessary to make the GCF fit for

purpose? Is it tens of millions, hundreds of millions, single digit

billions, or tens of billions?

The remainder of the presentation is to be based on the assumption

that the target operational scale of the GCF must be tens of billions

(USD/EUR)

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USAID

World Bank

JICA

AFDADB

DFID IDB

AFDB

CIDA

Global FundMPMF

0

2000

4000

6000

8000

10000

12000

14000

0 10 20 30

Sta

ffS

ize

(in

per

son

s)

Funds administered (in USD billion)

Fundingentity

Lower-boundadjustedvalues*

Higher-boundadjustedvalues**

Adjustedrange

Adjusted rangefor selectedagencies***

Figure 1. Staffing Intensities 2008/09Source: Ciplet et al. 2010

*250 staff / USD 1 billion **400 staff / USD 1 billion *** For DFID, JICA and USAID from left to right

Montreal Protocol Multilateral Fund: $150m, 28 staff: 190 staff/$bnAdaptation Fund: $33m, 7 staff: 210 staff/$bnThe Global Fund: 2.8bn, 600 staff: 220 staff/$bnWorld Bank: $27.8bn, 10’000 staff: 360 staff/$bn

3. Administrative Implications

3. Administrative Implications

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Secretariat MIEs

Secretariat MIEs NIEs

Board

Board

[A]

[B]

[C]

[D]

[E]

Figure 2. Operational Options

4. Governance Implications:The need for Subsidiarity

CDM EB Model

In their recent final report on CDM Governance, the CDM PolicyDialogue research team highlights that the secretariat ventures intoroles beyond mere administration, and emphasizes that it is importantto note the trend towards decision-making by default in the latestreview procedures, whereby a decision will automatically follow therecommendation made by the secretariat and RIT [Registration andIssuance Team] if a Board member does not recall the decision. So,while the decision is formally the EB’s, by implicit delegation it isactually the RIT’s and secretariat’s.

SecretariatBoard SecretariatBoard

Secretariat MIEs

Secretariat MIEs NIEs

Board

Board

[A]

[B]

[C]

[D]

[E]

Figure 2. Operational Options

4. Governance Implications:The need for Subsidiarity

The GEF Model

The GEF uses (multilateral) implementing entities (‘GEF agencies’),which not only have to be used to put forward a funding proposal –thus exercising a gatekeeper function – but which also formallyapprove the projects, after they have been endorsed by the GEF CEO.

The GEF CEO can endorse projects proposals up to $2million (aswell as enabling activities) without Council approval

SecretariatBoard

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Secretariat MIEs

Secretariat MIEs

Board

Board

[A]

[B]

[C]

[D]

[E]

Figure 2. Operational Options

4. Governance Implications:The need for Subsidiarity

The Adaptation Fund Model2. (j) “Implementing entities” means the national legal entities andmultilateral organizations that have been identified ex ante by theBoard as meeting the criteria adopted by the Board, in accordancewith decision 1/CMP.3, paragraph 5 (c), to access funding toimplement concrete adaptation projects and programmes supportedby the Fund.

‘Ordinary Direct Access’

SecretariatBoard

NIEs

SecretariatBoard[D]

[E]

Figure 2. Operational Options

4. Governance Implications:The need for Subsidiarity

NFEs

Enhanced Direct Access through National Funding Entities

In paragraph 47, the GCF Instrument stipulates that the Board will consideradditional modalities that further enhance direct access, including throughfunding entities with a view to enhancing country ownership of projects andprogrammes

Funding entities, … may be sub-national, national or regional legal entities or

international organizations, will be entitled to approve programmes or projects

in accordance with the relevant guidelines developed by the Board, and shall

receive resources from the Fund for that purpose.

To avoid confusion, it is important to emphasize the difference between an

Implementing Entity and a Funding Entity: the latter approves funding, the

former does not.

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MFEsSecretariat NFEs

Secretariat NFEsBoard

Board

[D]

[E]

4. Governance Implications:The need for Subsidiarity

Ordinary Multilateral Funding

[D] In-house The very first disbursement of project funding under the AF (for a direct access

project) was 32 months after its first Board meeting

The Pilot Programme for Climate Resilience (PPCR) started disbursing toprojects 28 months after the first PPCR Sub-committee meeting.

[E] Devolved• Devolution of multilateral funding to accredited Multilateral Funding Entities

MIEs NIEs

MFEs

Originally Presented by

MrV Saibaba

Chairman

FICCI Solar EnergyTask Force

CEO, Lanco Solar

Industry Recommendationson Green Climate Fund

15 February 2013Hotel Taj Mansingh, New Delhi

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Federation of Indian Chambers ofCommerce and Industry

Established in 1927, FICCI is the largest and oldest apex businessorganisation in India.

A non-government, not-for-profit organisation, FICCI is the voiceof India’s business and industry.

FICCI draws its membership from the corporate sector, bothprivate and public, including SMEs and MNCs; FICCI enjoys anindirect membership of over 250,000 companies from variousregional chambers of commerce.

Industry Consultation on GCF

FICCI conducted an Industry Consultation on the GCF on Feb 11,2013 in New Delhi

Supported by Ministry of Finance and UNDP

Objective to get industry’s views on concerns and expectationsfrom the GCF

Participants included industry and financial institutions

Discussion focused on accessibility, what should be funded, sourceof financing, and role of Indian financial institutions

Companies from both private and public sectors

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GCF Roles and ResponsibilitiesGCF Board:

Vision and mission

Own and implement 5 year global strategic plan and 3 year business plan

Approve country specific yearly plan

Help assist secretariat for resource mobilization

Secretariat:

Resource mobilization

Resource disbursement

Governance, MIS

GCF board should act as an enabler & facilitator and not a controller

GCF secretariat role should be to assist raise resources and provide resources to NationalFunding Entities*

Believe NFEs are capable to understand country specific climate change financerequirements and delegate authority and responsibility

* “National Implementing Agencies” in the original

Roles and Responsibilities (cont’d)GCF NFE (National Funding Entity):

5 year strategic, 3 year business and 1 year operational plan -Scan and Focus on national priorities aligning with globalobjectives

Utilize existing best possible/proven delivery mechanisms

Program & Project approval at the country level

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Access to GCF Large number of small enterprises should be able to access

easily in time bound manner

Easily accessble in time bound manner

Transparent processes

Flexible

Governance – Procedures &Modalities Need to create institutional mechanisms which avoid the problem

of creating a large bureaucracy at the global level

A national body into which GCF money could flow for furtherdisbursal

Need to create an institutional structure at domestic level that caninteract with GCF and act as an funding entity instead of a directaccess mechanism

Need for a National Funding Entity...

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Role of National Funding Entity Need to create an institutional mechanism at the domestic level to

cater to direct access of finance

Indian banks should become funding entities

Dedicated agencies that would be responsible for a single activityin coordination with the ministries

Steps to be taken to involve the private sector

GCF should come in the form of an endowment to the countrywhich can complement the National Clean Energy Fund (NCEF)

Transparent disbursal of GCF funds provided under programmaticapproach into projects

Summary of Recommendations

National Funding Entity (NFE) should be flexible and non-bureaucratic;

Transfer of resources from the GCF to NFE and from NFE toprivate sector should be simple and transparent;

National Funding Entities should decide what and how to fund Any mitigation/adaptation programme under the NFE should be

open to competition from anywhere There should not be any funds allocated with multiple objectives

or riders

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RecommendationsThe GCF should:

1. develop, as a matter of priority, NFE eligibility/accreditationcriteria for existing in-country entities to kick-start an EDF pilotprogramme

2. set up an institutional capacity building project for establishingNFEs as part of its readiness activities.

3. Accredit existing multilateral funds, such as the AdaptationFund, the LDCF, SCCF, GEF TF, as International FundingEntities in order to start ordinary multilateral funding soonestpossible.

4. Create an ad-hoc Expert Working Group of BoardMembers/Alternates and international experts to carry out thebackground work required for these tasks